speculative attacks Research Papers - Academia.edu (original) (raw)

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What is the role of “large players”, e.g., hedge funds, in speculative attacks? Recent work suggests that large players move early to induce smaller agents to attack. However, many observers argue that large players move late so as to... more

What is the role of “large players”, e.g., hedge funds, in speculative attacks? Recent work suggests that large players move early to induce smaller agents to attack. However, many observers argue that large players move late so as to benefit from interest rate differentials. We propose a model where large players can do both. Using data on currency trading by foreign (large) and local (small) players, we find that foreign players moved last in three attacks on the Norwegian krone during the 1990s. During the attack on the Swedish krona after the Russian moratorium in 1998, foreign players moved early. Gains by delaying attack were small, however, since interest rates did not increase.

• • by
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  • Currency Crises, Fx trading, F, speculative attacks
• • by John Duffy
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  • Computer Science, Economics, Economic Theory, Applied Economics